Output rises in an economy but workers' real wages fall. What does this indicate?
Answer and explanation
Correct answer: Workers did not receive an adequate share of growth
The governing concept is that GDP or total output is not the same as workers’ welfare. Real wages measure purchasing power after considering prices. If output rises while real wages fall, workers can buy fewer goods and may receive little of the additional output. Thus option C is correct. The other choices make absolute claims that do not follow from the evidence.
Frequently asked questions
What is the correct answer to this question?
Workers did not receive an adequate share of growth
Why is this the correct answer?
The governing concept is that GDP or total output is not the same as workers’ welfare. Real wages measure purchasing power after considering prices. If output rises while real wages fall, workers can buy fewer goods and may receive little of the additional output. Thus option C is correct. The other choices make absolute claims that do not follow from the evidence.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
